AUGUSTA – The tax debate at the Maine State House heats up this week as advocates of various overhaul proposals continue to test the political waters.

Views have been mixed on Gov. John Baldacci’s plan, which calls for a slight reduction of Maine’s highest income tax rate and the elimination of the personal property tax on business equipment. Much of the interest in other quarters has focused on Maine’s sales tax and the exemptions to it.

But on Sunday, two business leaders issued a joint statement hailing the second part of the governor’s plan.

Dana Connors, president of the Maine State Chamber of Commerce, and John Williams, president of the Maine Pulp and Paper Association, said scrapping the tax on business equipment would be the most important step Maine could take to encourage investment and promote good-paying jobs.

Baldacci’s proposal would eliminate the business equipment tax starting in 2007 and gradually phase out the Business Equipment Tax Reimbursement.

“Elimination of the business equipment tax is all about the future of Maine’s economy and our ability to support traditional as well as emerging industries,” Williams said.

The BETR program reimburses businesses for the tax on equipment paid to municipalities and has been at the center of a long-running debate over its benefits and costs.

Connors and Williams acknowledged that a phase-out could result in a loss of revenue to some municipalities, but suggested long-term economic gains would be worth it.

The governor’s proposal faces opposition from the Maine Municipal Association.

The Legislature’s Taxation Committee, which held an informal session on various plans Friday, is expected to reconvene Monday to hear comments from tax system experts in advance of a formal public hearing on proposed legislation slated for Tuesday.

Work sessions are scheduled to begin immediately on Wednesday.

A proposal put forth by the chairmen of the Taxation Committee, Sen. Joseph Perry, D-Bangor, and Rep. Richard Woodbury, an independent from Yarmouth, would fix the state income tax at a flat 6 percent and lower the sales tax to 4 percent while broadly expanding it to include untaxed items, including grocery staples, energy fuels and amusements.

Other proposals include one advanced by Rep. Ben Dudley, D-Portland, and endorsed by a group known as Taxpayers for a Fair Budget that would bolster targeted property tax relief provisions, set a new top rate of 10 percent for the wealthiest income taxpayers, expand the sales tax to some services and reduce parts of the BETR.